businessadministration1_12

7/31/2019 BusinessAdministration1_12

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Lecture No. 12: Delivery Improvement andInventory System

Takahiro FujimotoDepartment of Economics, University of Tokyo

Business Administration

1 Reduction of Production Period

2 Variety and Function of Inventory

3 Fixed-Quantity Order and Fixed-Period Order

4 Kanban System

The figures, photos and moving images with marks attached belong to their copyright holders. Reusingor reproducing them is prohibited unless permission is obtained directly from such copyright holders.


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Reduction of Production Period

Competitive effect of reducing production period

Direct effect

(1) order production delivery reduction(2) stock production demand projection accuracy

prevent out-of-stockinventory cost

Indirect effect

elicitation of waste , production problem increase in productivity, quality


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What is Production Period (Throughput Time) ?

Time required for material to absorb (receive)

product design information stocked within process,and be transformed to a product

Production Period =

Actually, in general, "time for not receiving information" isoverwhelmingly large.

(typically, time to accumulate as an inventory

Key to reduce a throughput time is in improving theinventory system .


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transmit product design information from worker/machine

materialsin-process products

final products

first process second process

inventorytime inventorytimeinventorytime

inventorytime

transportationtime

cycle time cycle time

production lead-time

legendstime for not receiving information

(inventory, transportation, etc.)

net working hours ( time for receiving information)

receiving receiving

Takahiro Fujimoto 'Introduction to Production Management' Nihon Keizai Shimbun, Inc. 2001 ( p209 figure.6.13)


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s u p pl yi n g

c om

p a n y

c u s t om

e r

design/workerinformation stock B

design/workerinformation stock A

information flow

product (Mono) flow

work (in-process product)

finished-productinventory

secondoperation

in-processproduct

inventory

firstoperation

materialinventory

informationM+A+B M+A+B M+A M+A M

informationM

product design(information M+A+B)

information Minformation B information A

product design information B product design information A


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lathe process

cycle: 1 min

grinding process

cycle: 1 min.in-process product inventory = zero

production period: 2 min.

lathe processcycle: 1 min

grinding processcycle: 1 min in-process product inventory = 1

production period: 3 min .

lathe processcycle: 1 min

grinding processcycle: 1 min

in-process product inventory = 10(first-in, first-out)

production period: 12 min

Diagram 6 14 In-Process Product Inventory and Throughput Time



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Variety and Function of Inventory


8/45Takahiro Fujimoto 'Introduction to Production Management' Nihon Keizai Shimbun, Inc. 2001 ( p213 figure.6.15)


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10/45Takahiro Fujimoto 'Introduction to Production Management' Nihon Keizai Shimbun, Inc. 2001 ( p215 figure.6.16)


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Fixed-Quantity Order and Fixed-Period Order

Order lot is constant.

Check inventory all the time.

Automatically place order when inventory reaches reorder point .

Order interval is elastic.

"2 bin system " is a typical case in point.


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Fixed-Quantity Order System

Order volume is constant each time. Order cycle is elastic.

cycleinventory

safetyinventory



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Case: Order cycle Lead-time

order lot

order cycle

average production base

average parts consumption volume

(slope)lead-time

safety inventory = B

point of order



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Case: Lead-time Order cycle

lead-time

order cycle

orderlot

point of order

unfilledorder




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container 2container 1

capacity = P

Consume material from Container 1.When Container 1 becomes empty, place a refill order.

Container 2 is firstly filledwith the arrived material.



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Balance between inventory-holding cost and out-of-stock cost(opportunity cost)

Assume a probability distribution of demand volume to accrue ina given period.

Set "probability of desirable out-of-stock" ( service level: 1 - s ).

Set safety inventory at a level where out-of-stock probabilitybecomes "S" at the bottom of inventory.

for example, in Critical Fractile method ,

s = L / (G + L) L = variable profit, G = inventory cost, etc.


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d

D = d torder lot Q

safety inventory B

timing of order

lead-time = t

S = 2.5%

service level = 97.5%

B 2

Ds distribution

where isDs standard

deviation



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annual demand volume(production volume in succeeding process)

lot size

ordering cost per 1 time

cost per unit

annual inventory interest rate

(borrowing interest + warehouse/ )

annualordering cost

annualinventory cost



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cost

per

per i od

aggregatecost

ordering cost inventory cost

Takahiro Fujimoto'Introduction to Production Management'Nihon Keizai Shimbun, Inc. 2001 ( p220 figure.6.20)


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Order cycle is constant. Order volume is elastic each time.

cycle inventory

safety inventory



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order cycle

lead-time

order lotlevel point of inventory

replenishment = Mupper limit of "inventory+ backlog= upper limit of B+d (T+t)

while,M = inventory level point = upper limit of "safety inventory + cycle inventory + unfilled order"

Ii = inventory at ordering time-point of sequential order iOi = unfilled order = 0 at ordering time-point of sequential order i

unfilled

order

unfilledorder

unfilled

order

unfilled

order

cycle inventory

c ycl e

i nvent or y

c ycl e

i nvent or y




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order cycle

lead-time

level point of inventoryreplenishment = Mupper limit of "inventory+ backlog= upper limit of B+d (T+t)

unfilledorder

unfilledorder unfilled order unfilled

orderunfilledorder

cycle inventory cycle inventory

c ycl e

i nvent or y

c ycl e

i nvent or y

while,M = inventory level point = upper limit of "safety inventory + cycle inventory + unfilled order"

Ii = inventory at ordering time-point of sequential order iOi = unfilled order = 0 at ordering time-point of sequential order i




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Kanban is---used for both delivery instruction (order) and productioninstruction (order release)

the card ( circulating invoice ) which can be used repeatedly.

(1) take-back Kanban

(2) order release (in-process) Kanban


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"Take back by succeeding process --- Process in a downstream goes to its upper stream

to take its required parts in a required quantity.I.e., a "pull method".

Kanban moves together with a standardized container whichincludes n units of in-process parts. (shadow of container)

number of containers (N) = number of Kanban pieces

speed of container's movement = speed of Kanban

(synchronization of Mono and information)


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assemblyprocess

partsprocess

finishedparts

storagesite

assemblylineside

take-back Kanbanin- process Kanban

acts asa delivery instruction

in- process Kanban

acts asan order release

assemblyinstruction

assemblycompletion

smallerparts

process

smallerparts

storagesite

partslineside

acts as

an identification tagtake-back Kanbanin- process Kanban

acts as

an identification tag

acts asa delivery instruction

in- process Kanban

acts asan order release

emptyempty empty empty

partsconsumption

partsconsumption

Reference: Drawn by the author in reference to Shgeo Shingo, previously stated book

partsconsumption

KanbanLegendsparts box actual parts flow of actual item flow of information Kanban

acts as


acts as


take-back Kanban take-back Kanban

Author making (reference: Shigeo Shingo 'IE consideration of the Toyota Production System')Reference: Takahiro Fujimoto 'Introduction to Production Mmanagement' Nihon Keizai Shimbun, Inc. 2001 ( p226)


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front view side view


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Bring 2 sheets together as the following .

Prepare

2 plates.


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25 parts(total number of parts: 75)today's production:25units


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order-release

Kanban

40 parts

first process

container

take-back Kanban

take-back Kanban

second processy p

5 units

finished

30 partsfirst process

3 unitsfinished

take-back Kanban

take-back Kanban

22 parts

second process

order-releaseKanban


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inventory


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inventory

precedingprocess

inventorytotal

succeedingprocess

onpassage

Takahiro Fujimoto'Introduction to Production Management'

Nihon Keizai Shimbun, Inc. 2001( p230 figure.6.24)


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shipping area atsucceedingprocess

post for receiving

Kanban's

receiving area atsucceeding process

production insucceedingprocess

post for receivingtake-backKanban's

empty containersat succeedingprocess

order-releaseKanbantake-back Kanban

container(containing 10 pieces)parts

precedingprocess

succeedingprocess



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B0 B1 B21 2 3I2 I 3 B3

mar k et D

1 2 3I 0 I 1 I 2 I 3

P1

t; t + i

P2T1 P3T2

information

feedbacktransportation

flow of Mono(product)

inventory waitingfor process

inventory waitingfor transportation

process

P volume for order release

T instructed volume for transportation

B

I

information

feedback

flow of Mono(product)

inventoryprocess

Pn order- release volumeLn instructed volume for transportation t; t + I important demand forecast for i period ahead

made at the end of t period

L 1 L 2 L 3

central controlk t; t+1 k t; t+2

k t; t+3P1 P2 P

3mar k et D


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EOQ(decision onorder lot)

EOQ(decision onproduct lot)

2

Safety inventorydecision problem

3

Waiting-in-processionproblem

4

1 input (arrival) 2 waiting, stagnation, inventory output (process)3cumul at i vei n

put t

Q

t

case of order lot problem

t

i nvent or y

t

t

(arrival)

t

A(t)

tB

safety inventory level = B

t

wai t i n

gi n

pr ocessi on

,

t

fixed volume of inventory consumption

t

t

service ratio

t

Q

Q

pace of process as

per probability distributionpace of arrivals asper probability distribution

fixed volume of inventory consumption

inventory consumption volume

as per probability distribution

cumul at i venumb er of

pr ocessed

per sons

to reduce

cumul at i venumb er of

ar r i ved

per sons

fixed volume of arriving inventory

fixed volume of arriving inventory

production lot = Q

fixed volume of arriving inventoryorder lot = Q

i nvent or y

i nvent or y

cumul at i vei n

put

cumul at i vei n

put

cumul at i veout put



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